Younger diners pose fast-food challenge

Most consumers will tell you they prefer fresh, tasty, healthy food over processed, greasy, assembly line fare. Millennials, though, may be the first generation to back that up with their wallets.

Fast-food operators say they are getting increasing pressure from thedemographic — generally defined as 18 to 34 year olds — to boost the quality of menu items or risk losing millennials. At stake is more than $1 trillion in spending by the group to the fast-casual category, which includes chains such as Chipotle Mexican Grill or Atlanta’s Moe’s Southwest Grill.

Readers of Consumer Reports, including millennials, the biggest generational group behind baby boomers, recently put such traditional chains as Burger King, Krystal and Church’s Chicken near the bottom of lists ranking fast-food chains on quality, value and healthy options.

The magazine noted that, despite higher prices, fast-casual alternatives such as Firehouse Subs and Five Guys Burgers and Fries were gaining in popularity because quality increasingly matters more to millennials than the convenience that has been fast-food’s advantage for decades.

“Millennials have a renewed fascination with food,” said David Farmer, vice president for product strategy and development for Atlanta-based Chick-fil-A. “They grew up on food television and are more knowledgeable about ingredients. And social media has put a lot of attention on quality and customization.”

Esther Yi, 25, counts herself among that group. Yi, a business affairs coordinator at Georgia State University, is a foodie who thinks knowledge of the subject has been assimilated into the every day lives of millennials. She thinks that leads them to be more interested in menu innovation, service and an expectation that food be “fresh” and sourced as locally as possible.

Yelping it

And because of their Internet savviness, food is a social experience for millennials, who post dinner pictures to websites or critique menu items in reviews.

“I don’t go to a place unless I ‘Yelp’ it,” Yi said.

Working in fast-food’s favor is the economic struggles of millennials. Though their economic clout is great because of their sheer number, they are faring worse financially than their parents — a reverse of typical monetary trends in America in which each successive generation does better than the last.

In fact, millennials’ economic struggles have been blamed in part for the market share losses of more moderately priced sit-down chains such as Olive Garden, Red Lobster and Ruby Tuesday, experts said.

But fast-food companies have struggled with the group because they are boxed into a menu that has to entice the broadest customer audience possible. And the more items they add to menus to grab more market share, the more crowded and confused their menus become.

“Most marketing leaders will tell you to figure out who you are and be true to yourself,” said Karen Bremer, executive director of the Georgia Restaurant Association.

As with all trends, there are caveats. Millennials, like all customers, will demand healthy choices in surveys, but they are not beyond buying the traditional meals that are the core of fast-food menus, said J.M. Owens, president of the Greater Atlanta McDonald’s Operators Association.

“All of us want to do a better job on what we put in our bodies,” he said. “(In reality) having salads on the menu gives us the psychological permission to come to McDonald’s and by a burger and milkshake.”

In a sense that is what may have affected impacted Krystal’s score with the Consumer Reports survey, said Doug Pendergast, the company’s president.Krystal moved its headquarters to Atlanta in late 2012, from its hometown of Chattanooga. Doug Pendergast, president of the chain, noted that it Krystal has salads on the menu but sales only amount to one-tenth of one percent of the total.

“In our research, we have seen a trend where the average customer has asked for more healthful options,” he said. “However, what people say in a survey and what they purchase in an actual restaurant are two different things. About 60 percent of all customers buy at least one Krystal hamburger with their order.” (Chicken, hot dogs and breakfast items are the other big sellers.)

Still, Pendergast and fast-food industry leaders said they are taking notes. While millennials are no more monolithic than any generation, there are common characteristics.

They like food they can share, are more willing than past generations to experiment with different types of food, love snacking and seek out chains with strong social responsibility credentials.

Chelsea Phillips, 22, said she knows the big fast-food chains have salads, but she prefers getting them from Moe’s or Panera Bread because she perceives their ingredients to be healthier.

“Moe’s has free-range proteins and that’s important to me because I focus on healthy eating,” the Vinings resident said. “It’s a choice for me. I can’t digest what they have at fast-food restaurants because the grease makes me sick.”

Flexible menus

Millennials heavy use of technology has led to an explosion of phone apps that allow them to record what they eat and share their meals and caloric intake with friends. The trick for fast-food companies is communicating that they have options that can fit with customers’ goals.

“Popeyes has 23 menu items that are 350 calories or less that our guests can mix and match to create their favorite meal while staying calorie conscious at the same time,” said Amy Alarcon, vice president of culinary innovation for Popeyes.

But Lisa Gearhart, who has studied the demographic for Jacksonville, Fla., public relations firm St. John & Partners, warns operators not to go overboard. She thinks millennials are driven more by flavor and “cravable” dishes than tasteless dishes that are good for them.

“Millennials are also very health conscious, but not health-obsessed,” said Gearhart, vice president of consumer insight for St. John. “For them, dining out is as much a social experience as much as it is about fueling up.”

Twitter, Instagram and Facebook allow brands to get real-time feedback on how products are received.

“On any given day, we’ll receive tons of responses from them on what we’re doing on social media,” said Stephanie Gamble, vice president of brand development for Athens-based Zaxby’s. “There is a desire for freshness and customization.”

Atlanta’s Wing Zone runs a yearly Facebook competition where the company asks fans what flavor leaders should develop next for wings, said founder and Chief Executive Officer Matt Friedman.

Millennials also support customizing food, which means fast-food restaurants will have to be more open to preparing food to customers’ specifications, chain leaders said. They even have influenced the design of restaurants, with seafood chain Captain D’s introducing multiple seating options in updated designs of its stores, said Chief Marketing Officer Jonathan Muhtar.

McDonald’s Owens said despite the subtle differences and all the investments being made to understand what they seek, millennials want the same thing everyone wants: “Good food that you feel good eating on a regular basis.”

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